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Being self-employed you can claim a number of business expenses, reliefs and deductions which will reduce your gross business profit. There are different rules which apply to different expenses, but mainly the expense has to be incurred ‘wholly and exclusively’ in the running of your business. It is possible to have some private benefit from an expense but it should either be incidental and not the main reason for the expense; or you can separate private and business use. The full expense may be deducted from your gross business profits.

One of the most common expenses incurred when running a business is motoring expenses. Capital allowances may be claimed for the cost of your car, even if it is bought using Hire Purchase. If the car is used for business and private use, only the business proportion will be allowable. Annual Investment Allowance isn’t permitted for the cost of cars. If a car is used for business and private use, it has to be entered as a single asset pool. The calculation of allowances which are due is dependent on date the car was purchased, the cost and if the car was purchased on or after 6th April 2009, the CO2 emissions.

The rules for cars purchased on or after 6th April 2009 are based on the CO2 emissions. A car which has emissions of more than 160g/km is put in the special rate pool and is eligible for 10 percent writing down allowances. If the emissions are 160g/km or less goes into the main pool and is eligible for 20 percent writing down allowances. A car with 110g/km or less will qualify for 100 percent first year allowance. The rules concerning car deductions are complex, which is why professional advice should be sought.

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